Uncertainty in Economic Theory

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"Recent decades have witnessed developments in decision theory that propose an alternative to the accepted Bayesian view. According to this view, all uncertainty can be quantified by probability measures. This view has been criticized on empirical as well as on conceptual grounds. David Schmeidler has offered an alternative way of thinking about decision under uncertainty, which has become popular in recent years." "This book provides a review and an introduction to this new decision theory under uncertainty. The first part focuses on theory: axiomatizations, the definitions of uncertainty aversion, of updating and independence, and so forth. The second part deals with applications to economic theory, game theory, and finance." This is the first collection to include chapters on this topic, and it can thus serve as an introduction to researchers who are new to the field as well as a graduate course textbook. With this goal in mind, the book contains survey introductions that are aimed at a graduate level student, and help explain the main ideas, and put them in perspective.
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Product Details

Table of Contents

1 Introduction 3
2 Preference axiomatizations for decision under uncertainty 20
3 Defining ambiguity and ambiguity attitude 36
4 Introduction to the mathematics of amibiguity 46
5 Subjective probability and expected utility without additivity 108
6 Maxmin expected utility with non-unique prior 125
7 A simple axiomatization of nonadditive expected utility 136
8 Updating ambiguous beliefs 155
9 A definition of uncertainty aversion 171
10 Ambiguity made precise : a comparative foundation 209
11 Stochastically independent randomization and uncertainty aversion 244
12 Decomposition and representation of coalitional games 261
13 An overview of economic applications of David Schmeidler's models of decision making under uncertainty 283
14 Ambiguity aversion and incompleteness of contractual form 303
15 Ambiguity aversion and incompleteness of financial markets 336
16 A quartet of semigroups for model specification, robustness, prices of risk, and model detection 364
17 Uncertainty aversion, risk aversion, and the optimal choice of portfolio 419
18 Intertemporal asset pricing under Knightian uncertainty 429
19 Sharing beliefs : between agreeing and disagreeing 472
20 Equilibrium in beliefs under uncertainty 483
21 The right to remain silent 522
22 On the measurement of inequality under uncertainty 531
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